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TELUS Reports Third Quarter 2012 Results

Strong wireless and data results drive earnings growthFree cash flow up 23 per centQuarterly dividend increased to 64 cents per share - up 10.3% from a
year agoCEO to take salary in TELUS shares for fourth consecutive year

VANCOUVER, Nov. 9, 2012 /CNW/ - TELUS Corporation's third quarter 2012
revenue increased six per cent to $2.8 billion, while earnings before
interest, taxes, depreciation and amortization (EBITDA) increased by
five per cent to $1.0 billion. Earnings per share rose eight per cent
to $1.08.

TELUS' growth was primarily generated by a seven per cent increase in
wireless revenue and a 12 per cent increase in wireless EBITDA,
resulting from a 23 per cent increase in data revenue due to continued
smartphone adoption. Wireline revenue growth of four per cent was
generated by a 14 per cent increase in data revenue driven by strong TV
and high-speed Internet growth.

TELUS' total customer base of 13 million grew with the addition this
quarter of 116,000 new postpaid wireless customers, 42,000 new TV
subscribers and 26,000 high-speed Internet customers, partially offset
by a moderating network access line loss of 39,000. TELUS' total
wireless subscriber base of 7.6 million is up five per cent year over
year and the average revenue per unit increased by 1.5 per cent. The
TELUS TV subscriber base of 637,000 is up 41 per cent from a year ago,
while high-speed Internet customers are up seven per cent to surpass
1.3 million.

Free cash flow in the third quarter increased 23 per cent from a year
ago to $426 million primarily due to higher EBITDA.

Annual guidance for 2012, which was last adjusted in August, has been
reaffirmed.

FINANCIAL HIGHLIGHTS

C$ and in millions, except per share amounts

3 months ended
September 30

Per cent

(unaudited)

2012

2011

change

Operating revenues

2,774

2,622

5.8

Operating expenses before depreciation & amortization

1,756

1,654

6.2

EBITDA(1)

1,018

968

5.2

Net income(2)

351

326

7.7

Earnings per share (EPS), basic(2)

1.08

1.00

8.0

Capital expenditures

471

470

0.2

Free cash flow(3)

426

345

23.5

Total customer connections(4)

12.98

12.57

3.3

(1)

See Section 11.1 in the 2012 third quarter Management's discussion and
analysis.

(2)

Net income and EPS for the third quarter of 2012 included favourable
income tax-related
adjustments of $3 million or one cent per share.

(3)

For definition, see Section 11.2 in 2012 third quarter Management's
discussion and analysis.

"Our long-standing strategy to invest in broadband wireless and wireline
data technology, services and applications within our core businesses
coupled with a focus on putting customers first has resulted in strong
quarterly operational and financial growth," said Darren Entwistle,
TELUS President and CEO. "We attracted 116,000 new postpaid wireless
customers, 42,000 new TV customers, and 26,000 new high-speed Internet
customers and encouragingly we saw those customers continuing to stay
with us longer, as evidenced by our industry leading 1.44 per cent
wireless churn rate. This strong performance translated this quarter
into double-digit data revenue growth, eight per cent earnings per
share growth and 23 per cent free cash flow growth."

"I am pleased that our winning strategy and continued strong operational
execution is enabling us to again increase the quarterly share
dividend, consistent with our dividend growth model that we announced
last year," Mr. Entwistle added. "We are increasing TELUS' dividend by
3 cents to 64 cents a quarter, or $2.56 annually, a 10.3 per cent
increase from a year ago. We look forward to continuing to deliver
strong operational and financial results to support the realisation of
our dividend growth ambitions through our 2013 commitment and beyond."

"I would like to take this opportunity to extend my deep gratitude to
Bob McFarlane for his enormous commitment and extraordinary
contributions to TELUS. After an outstanding 12 year career at our
company as CFO, Bob has decided to retire at the end of the year and
devote more time to his family and community endeavours," said Mr.
Entwistle. "Bob's distinguished leadership of TELUS' finance team has
yielded a legacy that includes setting rigorous financial policies,
achieving a stellar track record of disclosure transparency and helping
TELUS consistently deliver on our public commitments to the investment
community. His efforts, alongside those of his colleagues across TELUS,
have contributed greatly to our company's business success, globally
leading shareholder value creation amongst our peers and industry
leading balance sheet. Bob and our TELUS team have received countless
Canadian and global awards for excellence in corporate disclosure,
sustainability reporting, risk management and investor relations. Bob
was named CFO of the Year by Canadian Business magazine, and he was
honoured with the prestigious Queen's University Kathleen Beaumont Hill
Award for outstanding service and advocacy that have contributed to the
country's prosperity and growth in business, education and community
development. I greatly appreciate Bob's many years of support and his
commitment to ensuring a smooth transition to his highly capable
successor, John Gossling, who joins TELUS with a wealth of experience
in the communications and broadcasting industries."

Mr. Entwistle confirmed today that for the fourth consecutive year he
intends to take the entirety of his 2013 annual cash salary
compensation in TELUS common shares.

Robert McFarlane, TELUS Executive Vice-President and CFO, said, "TELUS
has a strong financial position as reflected by the combination of
continued good earnings and cash flow growth along with a 1.7 times net
debt to EBITDA ratio, which is well within our policy range and
represents the best such credit metric in the Canadian media and
telecom industry. This positions TELUS favourably for continued
advantaged access to the capital markets and to be in a strong position
for future wireless spectrum auctions, as well as for continued
dividend growth, and builds on our track record of balancing the
interests of debt and equity investors."

This news release contains statements about expected future events and
financial and operating performance of TELUS that are forward-looking.
By their nature, forward-looking statements require the Company to make
assumptions and predictions and are subject to inherent risks and
uncertainties. There is significant risk that the forward-looking
statements will not prove to be accurate. Readers are cautioned not to
place undue reliance on forward-looking statements as a number of
factors could cause actual future performance and events to differ
materially from that expressed in the forward-looking statements.
Accordingly this news release is subject to the disclaimer and
qualified by the assumptions (including assumptions for 2012 annual
guidance), qualifications and risk factors (including the potential for
a future non-voting to common share exchange proposal on a one-for-one
basis, semi-annual dividend increases to 2013 and CEO three year goals
for EPS and free cash flow growth to 2013 excluding spectrum costs)
referred to in the 2012 Information Circular, Management's discussion
and analysis (MD&A) in the 2011 annual report, and in the 2012 first,
second, and third quarter reports. Except as required by law, TELUS
disclaims any intention or obligation to update or
revise forward-looking statements, and reserves the right to change, at
any time at its sole discretion, its current practice of updating
annual targets and guidance.

OPERATING HIGHLIGHTS

TELUS wireless

External wireless revenues increased by $104 million or 7.4 per cent to
$1.5 billion in the third quarter of 2012, compared to the same period
a year ago. This growth was driven by continued subscriber and average
revenue per unit (ARPU) growth.

Data revenue increased by $102 million or 23 per cent to $546 million.
Data ARPU increased by $3.61 or 17 per cent to $24.51. These increases
were due to continued strong adoption of smartphones and related data
plans, higher roaming volumes, growth in mobile Internet devices and
tablets, and increased revenues from text messaging.

Blended ARPU increased by $0.90 or 1.5 per cent to $61.42 as 17 per cent
data ARPU growth more than offset a 6.8 per cent voice ARPU decline.
This is the eighth consecutive quarter of year-over-year blended ARPU
growth.

Blended monthly subscriber churn decreased 23 basis points
year-over-year to 1.44 per cent - the lowest third quarter result in
five years - reflecting the successful customers-first marketing and
service approach, effective investments in retention and lower churn on
smartphones. Postpaid churn was 1.10 per cent, down 23 basis points
from a year ago.

Total wireless net additions of 111,000 were lower by 2.6 per cent
year-over-year from the addition of 116,000 postpaid subscribers and a
loss of 5,000 lower-ARPU prepaid subscribers. Postpaid net additions,
which declined by 13 per cent from a year ago, were impacted by delayed
customer purchase decisions ahead of the anticipated launch of the new
iPhone 5 in late September.

Total wireless subscribers were up 4.8 per cent from a year ago to 7.56
million and the proportion of high-value postpaid subscribers increased
by two points to 85 per cent. Smartphone subscribers now make-up 63 per
cent of the total postpaid subscriber base of 6.4 million as compared
to 48 per cent a year ago.

Wireless EBITDA of $640 million increased $70 million or 12 per cent due
to strong revenue network growth and expense control. The margin of
42.4 per cent increased by 1.9 points over last year. Network service
revenue margin was up 2.4 points to 46.6 percent.

Simple cash flow (EBITDA less capital expenditures) increased by
$52 million or 13 per cent to $465 million in the quarter as EBITDA
growth was partially offset by increased capital spending related to
the ongoing expansion of TELUS' new 4G LTE network, as well as
investments in HSPA+ network capacity and coverage, and Internet data
centres.

TELUS wireline

External wireline revenues increased by $48 million or 3.9 per cent to
$1.27 billion in the third quarter of 2012, when compared with same
period a year ago. This growth was generated by increased data service
and equipment revenues, partially offset by declines in local,
long-distance, and other service and equipment revenues.

Data service and equipment revenues increased by $93 million or 14 per
cent, due primarily to strong growth in the TELUS TV subscriber base
and high-speed Internet and enhanced data services, rate increases, and
higher equipment sales.

TELUS TV additions of 42,000 were lower by 8,000 over the same quarter
last year, as stable growth in new customers and a significantly lower
churn rate were offset by a higher amount of deactivations from the
increasing subscriber base. The total TELUS TV subscriber base
increased 41 per cent to 637,000 up by 184,000 from a year ago.

High-speed Internet net additions of 26,000 were 18 per cent higher than
a year ago and reflect successful promotions and the pull-through
effect of Optik TV sales. TELUS' high-speed subscriber base of 1.3
million is up 7.0 per cent or 85,000 from a year ago.

Total network access lines declined 5.3 per cent from a year ago to
3.45 million. Residential line losses of 30,000 were unchanged
year-over-year, showing an improving sequential trend from the previous
two quarters. Residential lines are down 7.7 per cent year-over-year,
reflecting ongoing competition and wireless and Internet substitution.
Business NAL losses of 9,000 reflect ongoing price based competition in
the small and medium business market, and conversion from legacy voice
services to IP services.

Wireline EBITDA of $378 million decreased by $20 million or 5.0 per cent
due to ongoing declines in higher margin legacy voice services that
were not offset by growth in lower margin data services.

Simple cash flow (EBITDA less capital expenditures) declined slightly by
$3 million to $82 million in the quarter as lower EBITDA was largely
offset by lower capital spending.

CORPORATE AND BUSINESS DEVELOPMENTS

Bob McFarlane, EVP and CFO, retiring at year's end after outstanding
career
Bob McFarlane, executive vice-president and chief financial officer is
retiring effective at the end of the year after an extraordinarily
successful 12 years at TELUS. Bob will hand over responsibilities to
John Gossling effective January 1 after a transition period.

Bob began his career at TELUS as part of the Clearnet acquisition in
August 2000, a historic milestone in the expansion of our national
growth strategy focused on wireless and data. He was soon after
appointed CFO of TELUS based on his strong knowledge of the business,
deep understanding of the financial markets and proven track record for
raising capital. Bob has been instrumental in helping to answer
numerous and unprecedented challenges presented by the equity and
credit markets over the past dozen years such that TELUS has always had
access to long term financing to fund its prescient growth investments
in broadband wireless and wireline technology.

Indicative of his capabilities and excellent work ethic, Bob's
responsibilities while encompassing all the traditional Finance
functions, were extended in later years to include Corporate Strategy,
Mergers & Acquisitions, TELUS Ventures and Government & Regulatory
Affairs.

Bob's contributions alongside the efforts of his colleagues across
TELUS' leadership team have helped elevate TELUS' brand and reputation
to the highest levels in Canada and globally. In the area of corporate
and financial disclosure, TELUS has been ranked number one in Canada
for four of the last five years by the Canadian Institute of Chartered
Accountants. Our annual report has been recognized as the best in the
world, and TELUS was the only company globally to be ranked in the top
10 for eight consecutive years. Additionally, TELUS has won numerous
awards for its comprehensive social responsibility reporting including
12 consecutive years of recognition on the prestigious Dow Jones
Sustainability Indices.

Bob will be retiring from TELUS with a wonderful legacy of making
exceptional contributions that have benefited TELUS' shareholders,
customers, team and the communities in which we live, work and serve.

"Bob's distinguished contributions in combination with those of his
colleagues across TELUS' leadership team have delivered world-leading
shareholder value creation through price appreciation and dividend
growth," Mr. Entwistle concluded.

Experienced communications industry CFO, John Gossling joining TELUS
executive team
After an extensive executive search, John Gossling was chosen to join
TELUS' leadership team as our next executive vice president and chief
financial officer. He starts on November 12th and will work closely
with retiring EVP and CFO, Bob McFarlane, until the end of 2012 to
ensure an effective transition with respect to the leadership of the
TELUS Finance team.

John is a highly talented and proven finance executive with extensive
experience in the communications industry. From 2008 to 2011, he was
the CFO of CTVglobemedia, leading all financial activities for the
company. John helped drive dramatically improved financial performance
at CTVglobemedia prior to the sale of the company to BCE.

From 2000 to 2008, John held senior leadership roles with the Rogers
Communications organization, including CFO at Rogers Wireless. In this
role, John led all financial activities for the company. As a member of
the Rogers Wireless senior management team, John was a key player in
the turnaround of the company's operating performance and was a lead
executive on the acquisition of Microcell Telecommunications.

John is a Fellow of the Institute of Chartered Accountants of Ontario
(FCA). He and his family will be relocating to Vancouver.

TELUS shareholders vote decisively to approve 1:1 share exchange
proposal
At a joint shareholder meeting on October 17th, TELUS announced that
shareholders voted strongly in favour of its proposal to exchange the
company's non-voting shares for common shares on a one-for-one basis.
Mason Capital's four resolutions proposing alternate share exchange
ratios were also voted on at the meeting and did not pass.

Once final votes were tallied, 81.1 per cent of total shares voted were
in favour of TELUS' share exchange proposal. Of the 128.8 million
common shares voted, 62.9 per cent were in favour, and 99.5 per cent of
the 127.7 million non-voting shares voted were in favour. Excluding
Mason Capital's most recently reported voting stake, 84.4 per cent of
common shares voted were in favour. The voting results easily exceeded
the approval thresholds for the proposal to pass, specifically a simple
majority of common shares voted and two-thirds of non-voting shares
voted.Voting participation by shareholders was high at 73.6 per cent of the
common shares outstanding and 84.6 per cent of the non-voting shares
outstanding.

The hearing before the Supreme Court of British Columbia to hear Mason
Capital's appeals and TELUS' final order application under a plan of
arrangement to approve the share exchange began on November 7th. In
order for the share exchange to be effective, the Court will have to
approve the Company's application for a final order and dismiss all
current and further possible appeals. It is currently estimated that
the share exchange would not be effective until late November at the
earliest.

TELUS' 4G LTE wireless network continues to grow
In the third quarter, TELUS launched its LTE network in more than 50 new
communities across the country and now covers more than 60 per cent of
the Canadian population. Newly launched communities include:

TELUS launches iPhone 5
TELUS launched iPhone 5 to customers in Canada beginning on September
21. iPhone 5 is the thinnest and lightest iPhone ever, completely
redesigned to feature a stunning new 4-inch Retina display; an
Apple-designed A6 chip for blazing fast performance; and ultrafast
wireless technology—all while delivering even better battery life.
iPhone 5 comes with iOS 6, the world's most advanced mobile operating
system with over 200 new features including: Shared Photo Streams,
Facebook integration, all-new Maps app, Passbook organization and even
more Siri features and languages. iPhone 5 customers can connect to
TELUS' fast 4G LTE, HSPA+ and DC-HSPA+ networks with Wideband Audio..

TELUS eliminates activation fees for new and renewing customers
As part of the company's commitment to putting customers first and being
fair and transparent, TELUS announced that it will no longer charge a
$35 activation fee for new customers or a $25 equipment exchange fee
for renewing customers who purchase a new device. TELUS is the first of
the established wireless brands to eliminate activation fees as part of
the Company's ongoing efforts to make the customer experience clear and
simple. In addition, starting November 1, 2012, TELUS announced it will
begin charging $10 for SIM cards to cover the product cost that was
previously included in their renewal and activation fees.

TELUS launches Optik Smart Remote
In October, TELUS launched the Optik Smart Remote app, an innovative way
to surf TV and more using your mobile or tablet device. This app
enables customers to surf through all their content choices on their
phone or tablet instead of the traditional guide on the TV. Customers
can spend less time channel surfing by using guide filters to show only
what they are looking to find. By linking the mobile device with the
digital set top box, they can use swipes to change the channel.
Customers can also navigate the interactive program guide on their
mobile device without interrupting a show and, retrieve more program
related information from sources like Internet Movie Database (IMDb),
Wikipedia and YouTube. .

TELUS also added 10 new HD channels to its lineup during the quarter.
Optik TV offers more than 550 channels, including more than 135 in HD,
which TV customers can get all their HD channels for no extra charge.

TELUS Health eClaims continues to drive efficiencies in claims and
benefits management
In the third quarter, TELUS Health launched its nationwide eClaims
service for extended healthcare providers and extended its partnerships
with Sun Life and Desjardins to now offer TELUS Health eClaims web
portal service to their members across Canada. In addition, TELUS
Health entered into an agreement with Standard Life to integrate the
TELUS Health's eClaims service into its advanced TELUS Health
Multi-Benefit Claims Management (MBCM) platform, which will help reduce
out-of pocket expenses for plan members, decrease time spent processing
insurance paperwork for care providers and streamline the reimbursement
process.

TELUS Health launches Emergency Profile
TELUS Health recently created an Emergency Profile feature within TELUS
Health Space online portal. Emergency Profile is a free resource that
helps prepare families for an emergency quickly and easily and makes it
easy to access and share important health information with family
members and others. Consumers can sign up for an Emergency Profile by
visiting myhealthreference.com. Emergency profile is built on TELUS
Health Space, a secure platform certified by Canada Health Infoway to
store, organize and share health information.
In September, TELUS Health unveiled the new TELUSHealth.com, an online
hub to help bring customers smart healthcare solutions that turn
information into better health outcomes to help improve the
effectiveness of the country's healthcare system.

TELUS Health acquires KinLogix, Quebec's fastest-growing cloud-based EMR
provider
In October, TELUS acquired KinLogix, Quebec's fastest-growing
cloud-based Electronic Medical Record (EMR) provider. This is TELUS'
second EMR company acquisition this year, following B.C.-based Wolf
Medical Systems. These strategic acquisitions extend TELUS Health'
reach to physicians and strengthen its leadership in the EMR market to
further its efforts to accelerate the adoption of EMR solutions across
Canada. With these investments, TELUS is delivering on its national
strategy and commitment to the physician EMR market so the company can
continue to improve Canada's health system and deliver better health
outcomes for patients.

Generation INC., powered by TELUS: Season 3
The business TV show Generation INC., powered by TELUS, has started its
third season. The show features 12 local businesses from the province
of Québec who are visited by multidisciplinary experts who help them
reach their full potential through innovative advice, know-how and
technological tools. The Generation INC. movement has created much
enthusiasm amongst the small and medium business market such that more
than 500 local business owners submitted an application to be part of
the show and for a chance to benefit from the advice of the experts.

Toronto glass company wins The Challenge from TELUS and The Globe and
Mail
In September, TELUS and The Globe and Mail named Toronto-based glass
company Glassopolis the winner of The Challenge contest and awarded the
company a $100,000 small business grant to purchase new machinery and
expand production across North America.

This second annual contest invited Canadian small business owners to
present their biggest business challenge for the opportunity to win a
$100,000 grant from TELUS. Entrepreneurs across Canada were invited to
submit their entries to be judged by a panel that included
entrepreneurs and small business experts.

TELUS executive vice-president Josh Blair recognized as Breakaway Leader
In September, Josh Blair, TELUS executive vice-president of Human
Resources, was recognized as one of the Top 10 Breakaway Leaders in the
world at the Evanta Global HR Leadership Summit in Denver, Colorado.
The awards honoured international leaders who are changing the face of
their industry and inspiring a legacy of excellence through ingenuity
and dedication. Notably, TELUS is one of only two Canadian companies
represented on the Top 10 Breakaway Leaders list.

TELUS' annual report ranked one of best in world
The TELUS 2011 annual report has been ranked the 14th best in the world
across all industries and was the top-ranked Canadian company,
according to this year's Annual Report on Annual Reports 2012. To
develop the ranking, judges evaluated 500 annual reports shortlisted
from a wider selection of publicly listed corporations. The
comprehensive survey looks at 10 key evaluation criteria: packaging,
highlights, strategy, business, financials, investors, governance,
accounting, responsibility and communication. The judges gave the TELUS
2011 annual report an 'A' rating and cited it as an example of
excellence in four areas (executive message, financial review and
analysis, goals-targets-outlook, and risk factors and management). To
put this accomplishment in perspective, only 19 Canadian companies made
the top 300 and only two other Canadian companies made the top 50.

TELUS Celebration of Giving events laud local charities
This fall, TELUS celebrated local charities as it announced how much it
is giving this year toward local community initiatives through TELUS
Community Boards and other initiatives in Vancouver, Edmonton, Toronto,
Ottawa and Montreal. The TELUS Celebration of Giving is an annual event
that brings together professionals and volunteers from the community
sector. During this special day, TELUS recognizes the generosity and
dedicated work of all those who make a difference in their community.
In 2012, TELUS and its team expect to give $8 million to Vancouver-area
organizations, $4.5 million to local community initiatives in Edmonton,
$5.5 million to Greater Toronto-area charities and community
organizations, $1.4 million to Ottawa-based charities, and $3 million
to local charities in Montreal. In addition, funds are given to
numerous local community initiatives in other regions across Canada.

TELUS Community Excellence Awards in Quebec
In October, TELUS honoured three outstanding community leaders in the
Greater Montreal region. The top three winners of the TELUS Community
Excellence Awards are Manon Barbeau, co-founder, executive director and
artistic director of Wapikoni mobile; Ugo Dionne, co-founder of
Bénévoles d'affaires; and Bernard Lamarre, chairman of the board, École
Polytechnique. This important honour was part of the TELUS Celebration
of Giving in Montreal. Part of TELUS Quebec's 85th anniversary
celebrations, the TELUS Community Excellence Awards publicly recognizes
people who stand out because of their generosity, commitment to
philanthropy and passion for innovation in three main regions:
Montreal, Quebec and East of Quebec. This award was launched with the
Association of Fundraising Professionals-Quebec Chapter (AFP) and the
Association des professionnels en gestion philanthropique (APGP).

TELUS puts fans in the Canadian Football Hall of Fame with The Fan Cup
In September, TELUS and the Canadian Football League (CFL) announced The
Fan Cup presented by TELUS, the first ever trophy honouring the game's
most important player - the fans. Fans will have the opportunity to put
their name on a 100th anniversary replica Grey Cup that will sit
alongside the greats of the game inside The Canadian Football Hall of
Fame. Cast from the copper of Canadian pennies, The Fan Cup will be
engraved with the names of thousands of CFL fans from across Canada be
a symbol of appreciation for a century of loyal fan support. Fans will
create The Fan Cup trophy during The Grey Cup 100 Tour by using a
custom-built TELUS Penny Press to make their own 100th Grey Cup Game
collectable out of a Canadian penny. A sliver from every penny used to
create The Fan Cup presented by TELUS, which will then be etched with
all fans' names.

TELUS expands five-year partnership as National Co-Title sponsor of We
Day
TELUS is expanding its partnership with Free the Children, a non-profit
organisation that encourages youth to be agents of change and help find
solutions for local and global societal problems such as poverty,
hunger, bullying and environmental concerns. In addition to its
five-year partnership as national co-title sponsor of We Day, a series
of inspirational concerts taking place in cities across Canada, TELUS
is contributing funds to Free the Children through its Phones for Good
campaign. TELUS is also encouraging youth to share examples of their
volunteer efforts by writing to the company at telusforweday.com where
they can participate in a national video contest. The winner will
receive $20,000 to carry out a volunteer activity with a local charity.

TELUS Community Ambassadors donate 9,600 backpacks across Canada
This year, Community Ambassadors across Canada assembled 9,600 "Kits for
Kids", backpacks filled with basic school supplies for less fortunate
children. A challenge many families face in the fall is affording
school supplies. TELUS and its Ambassadors recognize the importance of
having these supplies to a young person's confidence and ability to get
off to a successful start at school. Since 2007, the Ambassadors have
given out nearly 60,000 Kits for Kids.

Dividend Declaration - Increase to 64 cents per quarter - up 10.3 per
cent year-over-year
The Board of Directors has declared a quarterly dividend increase of
three cents to sixty-four cents ($0.64) Canadian per share on the
issued and outstanding Common shares and sixty-four cents ($0.64)
Canadian per share on the issued and outstanding Non-Voting shares of
the Company payable on January 2, 2013 to holders of record at the
close of business on December 11, 2012.

In the event that the proposed share exchange of Non-Voting Shares to
Common Shares on a one-for-one basis receives all requisite approvals
and is effective prior to the dividend record date of December 11,
2012, holders of record on such date who previously held Non-Voting
Shares would hold Common Shares and would therefore receive the same
dividend as all other holders of Common Shares.

This new quarterly dividend represents the second increase this year and
the fourth of six planned under TELUS' plan for semi-annual dividend
increases of circa 10 per cent through to 2013. The dividend is a three
cent or 4.9 per cent increase from the $0.61 quarterly dividends paid
on July 3 and October 1, 2012 and a six cent or 10.3 per cent increase
from the $0.58 quarterly dividends paid on January 3 and April 2, 2012,
which is consistent with TELUS' dividend growth model. Dividend
decisions will continue to be subject to the Board's assessment and
determination of the Company's financial situation and outlook on a
quarterly basis.

TELUS' third quarter conference call is scheduled for November 9, 2012 at 11 a.m. ET and will feature a presentation followed by a question and answer
period with analysts. Interested parties can access the webcast at: telus.com/investors. A telephone playback will be available on November 9 until December 9
(1-855-201-2300), reservation no. 859140#, access code no. 30599). An
archive of the webcast will also be available at: telus.com/investors and a transcript will be posted on the website within several business
days.

About TELUS
TELUS (TSX: T, T.A; NYSE: TU) is a leading national telecommunications
company in Canada, with $10.8 billion of annual revenue and
13.0 million customer connections including 7.6 million wireless
subscribers, 3.4 million wireline network access lines, 1.3 million
Internet subscribers and more than 635,000 TELUS TV customers. Led
since 2000 by President and CEO, Darren Entwistle, TELUS provides a
wide range of communications products and services including wireless,
data, Internet protocol (IP), voice, television, entertainment and
video.

In support of our philosophy to give where we live, TELUS, our team
members and retirees have contributed more than $260 million to
charitable and not-for-profit organizations and volunteered 4.2 million
hours of service to local communities since 2000. Fourteen TELUS
Community Boards lead TELUS' local philanthropic initiatives. TELUS was
honoured to be named the most outstanding philanthropic corporation
globally for 2010 by the Association of Fundraising Professionals,
becoming the first Canadian company to receive this prestigious
international recognition.

Acquisition of additional equity interest in subsidiary from
non-controlling interest

—

—

—

(51)

Dividends paid by a subsidiary to non-controlling interest

—

—

—

(4)

Other

—

—

—

(6)

Cash provided (used) by financing activities

(502)

(364)

(973)

(349)

CASH POSITION

Increase (decrease) in cash and temporary investments, net

(27)

35

(1)

39

Cash and temporary investments, net, beginning of period

72

21

46

17

Cash and temporary investments, net, end of period

$

45

$

56

$

45

$

56

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS

Interest (paid)

$

(56)

$

(62)

$

(228)

$

(268)

Interest received

$

1

$

—

$

12

$

—

Income taxes (inclusive of Investment Tax Credits) (paid), net

$

(58)

$

(43)

$

(137)

$

(159)

segmented information

(unaudited)

Three-month periods ended

Wireless

Wireline

Eliminations

Consolidated

September 30 (millions)

2012

2011

2012

2011

2012

2011

2012

2011

Operating revenues

External revenue

$

1,501

$

1,397

$

1,273

$

1,225

$

—

$

—

$

2,774

$

2,622

Intersegment revenue

10

10

43

42

(53)

(52)

—

—

$

1,511

$

1,407

$

1,316

$

1,267

$

(53)

$

(52)

$

2,774

$

2,622

EBITDA(1)

$

640

$

570

$

378

$

398

$

—

$

—

$

1,018

$

968

CAPEX(2)

$

175

$

157

$

296

$

313

$

—

$

—

$

471

$

470

EBITDA less CAPEX

$

465

$

413

$

82

$

85

$

—

$

—

$

547

$

498

Operating revenues (above)

$

2,774

$

2,622

Goods and services purchased

1,222

1,178

Employee benefits expense

534

476

EBITDA (above)

1,018

968

Depreciation

362

331

Amortization

99

112

Operating income

557

525

Financing costs

86

92

Income before income taxes

$

471

$

433

Nine-month periods ended

Wireless

Wireline

Eliminations

Consolidated

September 30 (millions)

2012

2011

2012

2011

2012

2011

2012

2011

Operating revenues

External revenue

$

4,312

$

4,038

$

3,758

$

3,669

$

—

$

—

$

8,070

$

7,707

Intersegment revenue

30

29

127

122

(157)

(151)

—

—

$

4,342

$

4,067

$

3,885

$

3,791

$

(157)

$

(151)

$

8,070

$

7,707

EBITDA(1)

$

1,898

$

1,686

$

1,127

$

1,218

$

—

$

—

$

3,025

$

2,904

CAPEX(2)

$

520

$

340

$

940

$

995

$

—

$

—

$

1,460

$

1,335

EBITDA less CAPEX

$

1,378

$

1,346

$

187

$

223

$

—

$

—

$

1,565

$

1,569

Operating revenues (above)

$

8,070

$

7,707

Goods and services purchased

3,490

3,410

Employee benefits expense

1,555

1,393

EBITDA (above)

3,025

2,904

Depreciation

1,049

989

Amortization

338

340

Operating income

1,638

1,575

Financing costs

246

290

Income before income taxes

$

1,392

$

1,285

(1)

Earnings before interest, taxes, depreciation and amortization (EBITDA)
does not have any standardized meaning prescribed by IFRS-IASB
and is therefore unlikely to be comparable to similar measures presented
by other issuers; EBITDA is defined by the Company as operating
revenues less goods and services purchased and employee benefits
expense. TELUS has issued guidance on, and reports, EBITDA
because it is a key measure that management uses to evaluate performance
of its business and is also utilized in measuring compliance
with certain debt covenants.

(2)

Total capital expenditures (CAPEX).

TELUS CORPORATION

Management's discussion and analysis

2012 Q3

Caution regarding forward-looking statements

This document contains forward-looking statements about expected future
events and financial and operating performance of TELUS Corporation
(TELUS or the Company, and where the context of the narrative permits,
or requires, its subsidiaries). By their nature, forward-looking
statements are subject to inherent risks and uncertainties, and require
the Company to make assumptions. There is significant risk that
assumptions, predictions and other forward-looking statements will not
prove to be accurate. Readers are cautioned not to place undue reliance
on forward-looking statements as a number of factors could cause future
performance, conditions, actions or events to differ materially from
the targets, expectations, estimates or intentions expressed. Except as
required by law, the Company disclaims any intention or obligation to
update or revise any forward-looking statements, and reserves the right
to change, at any time at its sole discretion, its current practice of
updating annual targets and guidance. Annual targets, guidance and
related assumptions for 2012 are described in Section 9. Factors that could cause actual performance to differ materially
include, but are not limited to:

Competition including: continued intense competitive rivalry across all services
among established telecommunications companies, newer entrant wireless
operators, cable-TV providers, other communications companies and
emerging over-the-top (OTT) services; active price and brand
competition; TELUS' ability to offer an enhanced customer service
experience; industry growth rates including wireless penetration gain;
network access line losses; subscriber additions and subscriber
retention experience for wireless, TELUS TV® and Optik™ High Speed™
Internet services; costs of subscriber acquisition and retention;
pressures on wireless average revenue per subscriber unit per month
(ARPU) such as through flat rate pricing trends for voice and data,
inclusive long distance plans for voice, and increasing availability of
Wi-Fi networks for data; levels of smartphone sales and associated
subsidy levels; and ability to obtain and offer data content across
multiple devices on wireless and TV platforms.

Technological substitution including: reduced utilization and increased commoditization of
traditional wireline voice local and long distance services; increasing
numbers of households that have only wireless telephone services;
continuation of wireless voice ARPU declines such as through
substitution to messaging and OTT applications such as Skype; and OTT
IP services that may cannibalize TV and entertainment services.

Technology including: subscriber demand for data that could challenge wireless
network capacity, service levels and spectrum capacity; reliance on
systems and information technology; broadband and wireless technology
options, evolution paths and roll-out plans, including reliance on
wireless reciprocal network access agreements; choice of suppliers and
suppliers' ability to maintain and service their product lines;
wireless handset supplier concentration and market power; the expected
benefits and performance of long-term evolution (LTE) wireless
technology; dependence of rural LTE roll-out strategy on ability to
acquire spectrum in the 700 MHz band; successful deployment and
operation of new wireless networks and successful introduction of new
products (such as new LTE and tablet devices), new services and
supporting systems; network reliability and change management
(including risk of migration to new, more efficient Internet data
centres (IDCs) and realizing the expected benefits); timing of future
decommissioning of iDEN and CDMA wireless networks to free up spectrum
and reduce operating costs, and the associated subscriber migration and
retention risks; and successful upgrades and evolution of TELUS TV
technology.

Economic growth and fluctuations including: the strength of economic growth in Canada that may be
influenced by economic developments in the U.S., Europe, Asia and
elsewhere; future interest rates; and pension investment returns and
funding.

Capital expenditure levels in 2012 and beyond due to the Company's wireless deployment strategy
for future technologies including LTE, wireline broadband initiatives,
new IDC initiatives, and future Industry Canada wireless spectrum
auctions, including auction of spectrum in the 700 MHz band expected in
mid-2013 and the 2,500-2,690 MHz bands expected in 2014.

Financing and debt requirements including ability to carry out refinancing activities.

Ability to sustain growth objectives to 2013 including, over this timeframe, dividend growth of circa 10% per annum
and CEO goals of generating low double-digit percentage annualized
growth in earnings per share and greater growth in free cash flow,
excluding spectrum costs. The growth objectives may be affected by
factors such as regulatory and government developments and decisions,
competitive environment, reasonable economic performance in Canada, and
capital expenditure and spectrum auction requirements. The growth
objectives are not necessarily indicative of earnings, dividends and
free cash flow beyond 2013.

Regulatory approvals and developments including: future spectrum auctions and rules for the 700 MHz and
2,500-2,690 MHz bands (including the amount and cost of spectrum
acquired); whether application and ongoing enforcement of new
regulatory safeguards regarding vertical integration by competitors
into broadcast content ownership prove to be effective; restrictions on
non-Canadian ownership of TELUS Common Shares; increased foreign
control of certain newer wireless entrants; interpretation and
application of tower sharing and roaming rules; and amendments to
consumer protection legislation by several provinces and a new CRTC
proceeding to establish a mandatory code and clarity for consumers in
respect of terms and conditions of wireless services, where
non-harmonized provincial rules create risk of significant compliance
costs.

Pending completion of TELUS' share exchange proposal (Non-Voting Shares
into Common Shares on a one-for-one basis) overwhelmingly approved by shareholders on October 17, subject to: the
outcome of the hearing before the Supreme Court of British Columbia in
respect of Mason Capital's appeals and TELUS' final order application
under a plan of arrangement to approve the share exchange, held
starting on November 7, 2012, which also could be appealed. In
addition, if the arrangement is not approved, the market price of
Non-Voting Shares and/or Common Shares may decline given that the share
prices in both classes increased on the announcement of the original
share conversion proposal in February 2012.

Human resource developments including employee retention and engagement matters and the outcome of
collective bargaining for a Quebec region agreement that expired at the
end of 2011 (covering approximately 600 employees).

Ability to successfully implement cost reduction initiatives and realize
expected savings net of restructuring costs, such as from business integrations, business process outsourcing,
internal offshoring and reorganizations, procurement initiatives and
administrative office consolidation, without losing customer service
focus or negatively impacting client care.

Process risks including: reliance on legacy systems and ability to implement and
support new products and services; real estate joint-venture
development risks; and implementation of large enterprise deals that
may be adversely impacted by available resources and degree of
co-operation from other service providers.

Tax matters including a general tendency by tax collection authorities to adopt
more aggressive auditing practices; possible higher than currently
planned corporate income tax rates in the future; the federal
government's enacted policy change that eliminates the ability to defer
income taxes through the use of different tax year-ends for operating
partnerships and corporate partners, which is expected to increase
income tax payments commencing in 2014; costs and complexity of
complying with the Province of British Columbia's reversal from a
harmonized sales tax back to a separate provincial sales tax and
federal goods and services tax, as well as the Province of Quebec's
provincial sales tax harmonization; and international tax complexity
and compliance.

Health, safety and environmental developments; Litigation and legal matters; and other risk factors discussed herein and listed from time to time in TELUS' reports and
public disclosure documents including its annual report, annual
information form, and other filings with securities commissions in
Canada (on SEDAR at sedar.com) and in its filings in the United States, including Form 40-F (on EDGAR
at sec.gov). For further information, see Section 10: Risks and risk management in TELUS' 2011 MD&A and year-to-date updates in this MD&A.

Management's discussion and analysis (MD&A)

November 9, 2012

The following sections are a discussion of the consolidated financial
position and financial performance of TELUS Corporation for the
three-month and nine-month periods ended September 30, 2012, and should
be read together with TELUS' Condensed interim consolidated financial
statements dated September 30, 2012. This discussion contains forward-looking information qualified by
reference to, and should be read together with, the Caution regarding forward-looking statements.

The generally accepted accounting principles (GAAP) used by TELUS are
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board (IASB) and Canadian GAAP. The
terms IFRS-IASB and IFRS used subsequently in this document refer to
these standards. The Condensed interim consolidated financial
statements have been prepared in accordance with International
Accounting Standard 34, Interim Financial Reporting. All amounts are in Canadian dollars unless otherwise specified.

Management's discussion and analysis contents

Section

Description

1.

Introduction

A summary of TELUS' consolidated results for the third quarter and first
nine months of 2012

2.

Core business and strategy

A discussion of activities in support of TELUS' six strategic
imperatives

3.

Key performance drivers

A list of corporate priorities for 2012

4.

Capabilities

An update of factors that affect the capability to execute strategies,
manage key performance drivers and deliver results

5.

Discussion of operations

A discussion of operating performance for the third quarter and first
nine months of 2012

6.

Changes in financial position

A discussion of changes in the Consolidated statements of financial
position for the nine-month period ended September 30, 2012

7.

Liquidity and capital resources

A discussion of operating cash flows, investments and financing
activities, as well as liquidity, credit facilities and other
disclosures

8.

Critical accounting estimates and
accounting policy developments

Accounting estimates that are critical to determining financial results,
and changes to accounting policies

9.

Annual guidance for 2012

Reaffirmed guidance for the full year of 2012 and related assumptions

10.

Risks and risk management

An update of certain risks and uncertainties facing TELUS

11.

Definitions and reconciliations

Definitions of operating, liquidity and capital resource measures,
including calculation and reconciliation of certain non-GAAP measures
used by management

1. Introduction

The discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of the MD&A.

1.1 Preparation of the MD&A

The Company's disclosure controls and procedures are designed to provide
reasonable assurance that all relevant information is gathered and
reported to senior management on a timely basis, so that appropriate
decisions can be made regarding public disclosure. Management
determines whether or not information is material based on whether it
believes a reasonable investor's decision to buy, sell or hold
securities in the Company would likely be influenced or changed if the
information were omitted or misstated. The MD&A and the Condensed
interim consolidated financial statements were reviewed by TELUS' Audit
Committee and approved by TELUS' Board of Directors.

Management has issued guidance on and reports on certain non-GAAP
measures to evaluate performance of the Company and its segments.
Non-GAAP measures are also used to determine compliance with debt
covenants and to manage the capital structure. Because non-GAAP
measures do not generally have a standardized meaning, securities
regulations require such measures to be clearly defined, qualified and
reconciled with their nearest GAAP measure (see Section 11). The term EBITDA (earnings before interest, taxes, depreciation and
amortization) used in this document means standardized EBITDA as
defined by the Canadian Performance Reporting Board of the Canadian
Institute of Chartered Accountants (CICA). Adjusted EBITDA used in this
document deducts from standardized EBITDA, items of an unusual nature
that do not reflect ongoing telecommunications operations. See Section 11.1 for the definition, calculation and reconciliation of EBITDA.

1.2 Canada's economy

The Bank of Canada maintained its target for the overnight borrowing
rate at 1% in its October 2012 bank rate announcement. The Bank's
October 2012 Monetary Policy Report projected Canada's economy will
grow at 2.2% in 2012, 2.3% in 2013 and 2.4% in 2014. In addition,
Statistics Canada's Labour Force Survey reported the September 2012
national unemployment rate at 7.4% as compared to 7.2% in June and
March 2012, and 7.5% in December 2011.

Capital expenditures exclude changes in associated non-cash investing
working capital, and therefore differ from
Cash payments for capital assets, as presented on the Condensed interim
consolidated statements of cash flows.
See Note 24(b) of the Condensed interim consolidated financial
statements.

3

The sum of wireless subscribers, network access lines (NALs), Internet
access subscribers and TELUS TV
subscribers (Optik TV™ and TELUS Satellite TV® subscribers), measured at
the end of the respective periods based
on information in billing and other systems

Adjusted EBITDA for the first nine months of 2012 excludes equity losses
of $2 million for the TELUS Garden
residential real estate redevelopment partnership and a $9 million
pre-tax gain on land contributed to the residential
project. TELUS anticipates that it will not retain an ownership interest
in this residential project after completion of
construction. Adjusted EBITDA for the first nine months of 2011 excludes
a $16 million non-cash gain on Transactel
(Barbados) Inc. that resulted from re-measurement of the Company's 51%
interest in Transactel at fair value when
TELUS exercised its purchased call option and asserted control.

6

EBITDA margin is EBITDA divided by Operating revenues. The calculation
of Adjusted EBITDA margins for 2012
excludes equity losses and gain on contributed land for the TELUS Garden
residential project from both EBITDA
and Operating revenues. The calculation of Adjusted EBITDA margin for
the first nine months of 2011 excludes the
non-cash gain on Transactel from both EBITDA and Operating revenues.

Operating highlights

Consolidated Operating revenues increased by $152 million and $363 million, respectively, in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011.

Service and equipment revenues increased year over year by $143 million
and $356 million, respectively, in the third quarter and first nine
months of 2012. The increases were mainly due to growth in wireless
network revenue from subscriber growth and ARPU increase, as well as
growth in wireline data revenue. Growth in wireline data revenue
resulted primarily from Optik TV, enhanced data and Internet services,
data equipment sales and managed workplace services, which exceeded
declines in legacy voice local and long distance services.

Other operating income increased year over year by $9 million and
$7 million, respectively, in the third quarter and first nine months of
2012. The increases were mainly due to drawdowns from the regulatory
price cap deferral account for provisioning broadband Internet service
to a number of qualifying rural and remote communities, as well as
recoveries of employee costs under eligible government-sponsored
employment programs. The nine-month period also included the second
quarter 2012, $9 million gain on land contributed to the TELUS Garden
residential real estate project offset by the first quarter 2011,
$16 million non-cash gain on Transactel (Barbados) Inc.

Excluding the equity losses and gain on land related to the TELUS Garden
residential real estate redevelopment project in 2012 and the non-cash
Transactel gain in 2011, adjusted operating revenues increased year
over year by $372 million or 4.8% in the first nine months of 2012.

Total subscriber connections increased by 410,000 during the 12-month period ended September 30,
2012, as a result of 7.3% growth in wireless postpaid subscribers, 41%
growth in TELUS TV subscribers and a 5.7% growth in total Internet
subscriptions, partly offset by an 7.4% decrease in wireless prepaid
subscribers, a 7.7% decline in residential network access lines (NALs)
and a 2.5% decline in business NALs. Wireless net subscriber additions
were 111,000 and 219,000, respectively, in the third quarter and first
nine months of 2012. TELUS TV and Optik High Speed Internet subscriber
additions totalled 68,000 in the third quarter and 191,000 in the first
nine months of 2012.

For the third quarter of 2012, wireless blended ARPU was $61.42, up
$0.90 or 1.5% from the same period in 2011, while for the first nine
months of 2012, blended ARPU was $60.20, up $1.09 or 1.8% from the same
period in 2011. Quarterly blended ARPU has increased year over year for
eight consecutive quarters driven by increased roaming and growth in
data usage.

Blended monthly wireless subscriber churn rates were 1.44% and 1.46%,
respectively, in the third quarter and first nine months of 2012, down
0.23 percentage points and 0.22 percentage points, respectively, from
the same periods in 2011. Improvement in the churn rates was due to
retention efforts, as well as significantly higher migrations in 2011
related to the loss of a federal government wireless service contract
to a low-priced bid from an established competitor.

Operating income increased by $32 million and $63 million, respectively, in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011, as higher EBITDA more than offset increases in total depreciation and amortization
expenses. Wireless EBITDA increased year over year by $70 million and
$212 million, respectively, in the third quarter and first nine months
of 2012 mainly due to growth in network revenue and 47% flow through to
EBITDA. Wireline EBITDA decreased year over year by $20 million and
$91 million, respectively, in the quarter and nine-month period as
growth in wireline data services was more than offset by higher content
and support costs for the growing Optik TV service and ongoing declines
in higher margin legacy voice services.

Adjusted EBITDA increased by $50 million and $130 million, respectively, in the third
quarter and first nine months of 2012, when compared to the same
periods in 2011. Adjusted EBITDA in the first nine months of 2012
excludes equity losses from the TELUS Garden residential real estate
redevelopment project, as well as a $9 million gain on land contributed
to the project. Adjusted EBITDA for the first nine months of 2011
excludes the $16 million non-cash gain on Transactel. Adjusted EBITDA margins in 2012 decreased slightly from the comparable periods in 2011, as 2.4
percentage point increases in wireless margins for the quarter and
nine-month periods were offset by decreases in wireline margins of 2.7
percentage points for the quarter and 2.9 percentage points for the
nine-month period.

Income before income taxes increased by $38 million and $107 million, respectively, in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011. The increases were due to higher EBITDA and lower financing
costs, partly offset by higher total depreciation and amortization
expenses.

Income taxes increased by $13 million and $58 million, respectively, in
the third quarter and first nine months of 2012 when compared to the
same periods in 2011. The increases reflect higher pre-tax income and
the effects of income tax revaluations and adjustments, partly offset
by a lower blended statutory income tax rates in 2012.

Net income increased by $25 million or 7.7% in the third quarter of 2012 and
increased by $49 million or 5.0% in the first nine months of 2012 when
compared to the same periods in 2011. Excluding income tax-related
adjustments, the gain net of equity losses for the residential real
estate redevelopment project and the 2011 gain on Transactel, as shown
in the following table, Net income increased year over year by
$22 million or 6.7% in the quarter and $64 million or 6.7% in the
nine-month period.

Basic earnings per share (basic EPS) increased by eight cents in the third quarter of 2012 and
16 cents in the first nine months of 2012 when compared to the same
periods in 2011. Excluding income tax-related adjustments, the gain net
of equity losses for the residential real estate redevelopment project
and the 2011 gain on Transactel, as shown in the following table, basic
EPS increased year over year by approximately seven cents in the
quarter and 20 cents in the nine-month period.

Cash dividends declared: On November 7, 2012, the Board of Directors declared a fourth quarter
dividend of 64 cents per share on the issued and outstanding Common
Shares and Non-Voting Shares of the Company, payable on January 2,
2013, to shareholders of record at the close of business on
December 11, 2012. The fourth quarter dividend of 64 cents per share
reflects an increase of 6 cents or 10.3% from the dividend one year
earlier, consistent with TELUS' dividend growth model (see Financing and capital structure management plans in Section 4.3).

Share exchange

On August 21, 2012, the Company announced that holders of its Common
Shares and Non-Voting Shares would have the opportunity to decide
whether to exchange the Company's Non-Voting Shares for Common Shares
at a general meeting of holders of Common Shares and a class meeting of
holders of Non-Voting Shares, respectively, to be held October 17,
2012. Under the terms of the proposal, each Non-Voting Share would be
exchanged for a Common Share on a one-for-one basis, effected by way of
a court-approved plan of arrangement and would be subject to the
approval of a simple majority of the votes by the holders of Common
Shares and two-thirds of the votes by the holders of Non-Voting Shares,
each voting separately as a class. On October 15, 2012, a Court Order
was issued by the Supreme Court of British Columbia directing that the
meeting to consider TELUS' plan of arrangement and the meeting to
consider certain resolutions attached to a shareholder requisition
provided by CDS Clearing and Depository Services Inc. on behalf of
Mason Capital Management LLC, proceed on October 17, 2012, as a joint
meeting. At the joint meeting, the Company announced that TELUS' plan
of arrangement obtained the necessary approvals from the holders of
Common Shares and holders of Non-Voting Shares and that the Mason
resolutions had not obtained the necessary approvals. For TELUS' plan
of arrangement, 99.5% of the 127.7 million Non-Voting Shares voted were
in favour and 62.9% of 128.8 million Common Shares voted were in
favour. Excluding hedge fund manager Mason Capital's most recently
reported voting bloc, 84.4% of Common Shares voted were in favour of
the exchange. A hearing before the Supreme Court of British Columbia in
respect of Mason Capital's appeals and TELUS' final order application
under a plan of arrangement was held starting on November 7, 2012. See
the Share exchange risk discussion in Section 10.1 Regulatory matters.

TELUS is subject to restrictions on foreign ownership and has controls
in place to ensure that foreign-ownership levels are respected through
a reservation and declaration system. See the Foreign-ownership restrictions discussion in Section 10.1 Regulatory Matters.

Liquidity and capital resource highlights

TELUS had unutilized credit facilities of more than $1.3 billion at
September 30, 2012, as well as $100 million availability under the
Company's trade receivables securitization program, consistent with its
objective of generally maintaining more than $1 billion of unutilized
liquidity.

Net debt to EBITDA - excluding restructuring costs was 1.7 times at September 30, 2012, down from 1.8 times at December 31
and September 30, 2011. The ratio remains within the Company's
long-term target policy range of 1.5 to 2.0 times.

Cash provided by operating activities increased by $128 million and $708 million, respectively, in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011. The increases were due to a number of factors including
working capital changes, higher adjusted EBITDA, lower net
restructuring payments and lower net payments of interest. For the
nine-month period, the increase also resulted from lower discretionary
employer contributions to defined benefit plans, absence in 2012 of the
one-time mandated regulatory rebates to residential subscribers made in
2011, and lower net payment of income taxes.

Cash used by investing activities increased by $52 million and $124 million, respectively, in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011. The increase for the quarter was mainly due to payment timing
differences for capital assets, as capital expenditures were flat year
over year. The increase for the first nine months was principally due
to $125 million higher capital expenditures, which included investments
in the wireless LTE network and two state-of-the-art intelligent
Internet data centres (IDCs).

Cash used by financing activities increased by $138 million and $624 million, respectively, in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011, mainly due to reductions in long-term debt and short-term
borrowing, and increased dividends. Dividend payments increased due a
higher dividend rate and a slightly higher number of shares
outstanding, and for the nine-month period, due to the Company no
longer issuing shares from treasury for reinvested dividends after
March 1, 2011. These increases for the nine-month period were partially
offset by the second quarter of 2011 acquisition of an additional
equity interest in Transactel (Barbados) Inc. - a cash flow that was a
change in investment in a controlled entity that did not also result in
a change in control and was presented as a financing activity.

Free cash flow increased by $81 million and $275 million, respectively, in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011. The increases were mainly due to higher adjusted EBITDA, lower
contributions to defined benefit plans net of defined benefit plan
expenses, lower restructuring payments net of restructuring costs, and
lower net payments of interest, partly offset by higher year-to-date
capital expenditures.

2. Core business and strategy

The discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of the MD&A.

TELUS' core business and strategy were described in Section 2 of its
annual 2011 MD&A. Activities in the first nine months of 2012 that
support the Company's six strategic imperatives include the following.

Building national capabilities across data, IP, voice and wireless

The Company's efforts continue to be focused on wireless capacity
upgrades, ongoing deployment of a new LTE wireless network in urban
markets, investments in new state-of-the-art Internet data centres
(IDCs), as well as continued investments in broadband infrastructure
expansion and upgrades to support growth in Optik TV and Internet
services. Broadband investments include completing the overlay of VDSL2
technology in the West and in Eastern Quebec. TELUS also continues to
deploy fibre to the home in new residential areas, and fibre to the
building in new multi-dwelling units.

TELUS launched LTE network service in 14 metropolitan areas across
Canada in February 2012 and reached more than 60% of Canadians at
September 30, 2012. Coverage continues to expand and by the end of 2012
is expected to reach approximately 90% of British Columbians, more than
80% of Albertans, and nationally, more than two-thirds of Canadians.
TELUS' urban LTE network operates on advanced wireless services (AWS)
spectrum, acquired by the Company for $882 million in Industry Canada's
2008 auction, and supports manufacturer-rated peak data download speeds
of up to 75 Mbps (typical speeds of 12 to 25 Mbps expected; actual
speed may vary by device used, topography and environmental conditions,
network congestion, signal strength and other factors). Outside of LTE
coverage areas, LTE devices offered by TELUS also work on the HSPA+
network, which covers 34.3 million Canadians at September 30, 2012, or
98% of the population.

TELUS is further enhancing its national capability to support cloud
computing services and internal requirements by investing a total of
approximately $150 million for new state-of-the-art intelligent IDCs in
Rimouski, Quebec and Kamloops, B.C. Phase I of the Rimouski facility
opened in August 2012 and has gone into service. The new facilities
have been designed to Uptime Institute Tier III standards for
reliability and security, and to the leadership in energy and
environmental design (LEED) gold standards for sustainability. A
modular design approach facilitates secure, efficient, reliable and
scalable expansion of the facilities in the future. The Kamloops
facility is expected to go into service in mid-2013.

Aided by the use of hydro-electrically generated power and natural
cooling, the new IDCs are expected to be among the most environmentally
sustainable operations of their type in North America. The facilities
will be directly connected to the national TELUS IP network and
interconnect into existing TELUS data centres across the country,
creating an advanced and regionally diverse computing infrastructure in
Canada.

The Company continues to invest in its wireline broadband network to
expand capacity and coverage. At September 30, 2012, the Company's
broadband high-definition (HD) coverage, including VDSL2 and ADSL2+
coverage, reached approximately 2.4 million households in B.C., Alberta
and Eastern Quebec, as compared to less than 2.2 million households one
year earlier.

Focusing relentlessly on the growth markets of data, IP and wireless

In August 2012, the Company introduced prepaid services to the Koodo®
brand for the first time. Koodo prepaid is distributed through Walmart
stores, Koodo kiosks and Koodomobile.com. Koodo prepaid plans were
launched to complement existing Koodo postpaid offerings. Basic prepaid
plans start at $15 for 30 days for call display, voicemail, unlimited
text and picture messaging (excluding premium messages and
subscription-based messages) and per-minute charges for talk minutes.
Talk Booster™ and Data Booster™ add-ons are available that do not
expire if the basic plan remains active.

In May 2012, TELUS announced a two-year extension to its agreement with
the Ontario Ministry of Health and Long-Term Care. Under the agreement,
TELUS provides management, operation and maintenance of electronic
processing systems and technology support services, which enable
online, real-time processing of drug claims under the Ontario Public
Drug Programs.

The Company's strategy of focusing on growth markets is reflected in the
wireline data revenue and wireless revenue total of $6.4 billion for
the first nine months of 2012, which reflects an increase of
$499 million or 8.4% when compared to the first nine months of 2011.
This increase exceeds the $143 million year-over-year decline in legacy
wireline voice and other service and equipment revenues in the first
nine months of 2012.

Providing integrated solutions that differentiate TELUS from its
competitors

The Company's first priority is to provide an excellent customer service
experience and improve the likelihood that TELUS is recommended as a
service provider. To help accomplish this, and make the customer
experience clear, simple and easy, on October 15, 2012, TELUS announced
that it would no longer charge a $35 activation fee for new wireless
service customers or charge a $25 equipment exchange fee for renewing
customers who purchase a new device. Previously, these fees were
sometimes waived for promotional events or other reasons. Effective
November 1, 2012, when customers do not already have a compatible TELUS
SIM card for their device, the Company began charging $10 for the SIM
card that was previously included in the activation or renewal fee.
TELUS customers are now realizing net activation or renewal savings
even when a SIM card is required. This latest change builds upon a
series of improvements over the past several years, including:
elimination of carrier 911 fees and system access fees on all of the
Company's Clear & Simple® rate plans; introduction of data flex plans,
data notifications and worry-free travel; adding caller ID and
voicemail as standard on all TELUS rate plans; simplified device
pricing with anytime upgrades; and replacing contract termination fees
with a declining initial device subsidy balance.

TELUS introduced several innovations for Optik TV in 2012:

Optik on the go provides Optik TV customers in B.C. and Alberta with the capability to
view a growing selection of commercial-free TV on-demand shows and
movies on their mobile devices, tablets and laptops, whether at home,
or away from home using TELUS' 4G LTE wireless network or Wi-Fi. Should
TELUS' customers travel outside of the 4G LTE network coverage area,
they will move seamlessly onto the existing 4G HSPA+ network. There is
no additional charge for Optik TV customers to watch select TV
On Demand shows and movies from channels they already subscribe to.
Tablet and smartphone users can enjoy the service without incurring
data charges by using Wi-Fi to connect to the Internet. When compatible
devices connect via a mobile network, data usage charges would apply.

In October 2012, TELUS launched the free Optik Smart Remote app that
Optik TV customers can download to their mobile phone or tablet. The
app enables customers to navigate the interactive program guide on the
mobile device without interrupting the show on the TV. The app also
provides access to program-related information from sources like IMDb
(Internet Movie Database), Wikipedia and YouTube.

In July, TELUS introduced Multi-View on Optik TV, which allows customers
to watch up to four channels at once on the same screen. With
Multi-View, one channel is displayed in the main window with audio at
the same time that up to three other TV programs are displayed in
smaller windows. The customer can quickly switch to one of the smaller
displayed programs to full screen when the action picks up, such as for
a sporting event. The Company also introduced the Weather Network app
on Optik TV, allowing users to check weather at any time. Multi-View
and the Weather Network app are available free, however, a subscription
to Optik High Speed Internet is required for the Weather app.

TELUS customers who use an Xbox 360 as their set-top box may now control
both live and recorded TV with hand gestures and voice commands with
the addition of an Xbox 360 Kinect sensor.

A free Twitter app provides access to Twitter features and content while
watching Optik TV. Users can tweet what they are watching, follow TV
tweets about their favourite shows, discover top trends and get the
latest social news and events.

The Company introduced TELUS Managed Mobility Services powered by Vox
Mobile - a service offering that manages an enterprise's mobile
infrastructure and devices from procurement to payment and leverages a
growing trend of enterprises adopting "bring your own device" policies
for their employees. TELUS Managed Mobility Services offers enterprises
a series of six individual, yet integrated, service modules to provide
an end-to-end service option for managing wireless devices on multiple
platforms, from multiple carriers.

Partnering, acquiring and divesting to accelerate the implementation of
TELUS' strategy and focus TELUS resources on the core business

TELUS has made smaller business acquisitions and related investments
complementary to the Company's existing lines of business in 2012. This
includes enhancing capabilities in respect of cloud-based electronic
medical records (EMR) solutions and international business process
outsourcing call centre operations, as well as acquiring certain
TELUS-branded wireless dealership businesses.

Investing in internal capabilities to build a high performance culture
and customer excellence

The Company has opened new TELUS-branded retail stores in Saskatoon,
Toronto and Victoria that are designed to meet the specific needs of
small and medium businesses. Business clients have the opportunity to
try out technologies with one-on-one assistance from TELUS experts. The
stores also have learning centres that offer tutorials to help clients
learn how to get the most out of their communications technology.

Going to the market as one team under a common brand, executing a single
strategy

In September 2012, TELUS unveiled TELUSHealth.com, a new online
healthcare hub for healthcare professionals. The site offers solutions
such as eClaims, personal health records and home care monitoring, as
well as educational resources, news, events and publications to assist
healthcare professionals in their practice. TELUS Health provides
technologies and applications that connect professionals to the right
information and enable more rapid acceptance and adoption of health
information technology solutions. Information is moved securely on
TELUS's telecommunications infrastructure.

3.Key performance drivers

The discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of the MD&A.

Management confirms or sets new corporate priorities each year to both
advance TELUS' long-term strategic priorities and address near-term
opportunities and challenges. Corporate priorities are key performance
drivers that help achieve key performance measures quantified by the
Company's public financial targets disclosed in Section 9.

Corporate priorities for 2012

Deliver on TELUS' future friendly brand promise by putting customers
first
Increase TELUS' competitive advantage through technology leadership
Drive TELUS' leadership position in its chosen business and public
sector markets
Accelerate TELUS' leadership position in healthcare information
technology
Strive to further improve operational efficiency and effectiveness at
TELUS
Build TELUS' culture for sustained competitive advantage.

4. Capabilities

The discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of the MD&A.

4.1 Principal markets addressed and competition

The principal markets addressed by the Company and an overview of the
Company's competition were described in Section 4.1 of TELUS' annual
2011 MD&A.

4.2 Operational resources

Operational resources were described in Section 4.2 of TELUS' annual
2011 MD&A.

4.3 Liquidity and capital resources

Capital structure financial policies

The Company's objectives when managing capital are: (i) to maintain a
flexible capital structure that optimizes the cost and availability of
capital at acceptable risk; and (ii) to manage capital in a manner that
considers the interests of equity and debt holders.

In the management and definition of capital, the Company includes Common
Share and Non-Voting Share equity (excluding accumulated other
comprehensive income), long-term debt (including any associated hedging
assets or liabilities, net of amounts recognized in accumulated other
comprehensive income), cash and temporary investments and securitized
trade receivables.

The Company manages its capital structure and makes adjustments to it in
light of changes in economic conditions and the risk characteristics of
the underlying assets. In order to maintain or adjust its capital
structure, the Company may adjust the amount of dividends paid to
holders of Common Shares and Non-Voting Shares, purchase shares for
cancellation pursuant to permitted normal course issuer bids, issue new
shares, issue new debt, issue new debt to replace existing debt with
different characteristics and/or increase or decrease the amount of
trade receivables sold to an arm's-length securitization trust.

The Company monitors capital utilizing a number of measures, including
net debt to EBITDA - excluding restructuring costs and dividend payout
ratios. See Section 7.4 Liquidity and capital resource measures.

Report on 2012 financing and capital structure management plans

Pay dividends to the holders of TELUS Common Shares and Non-Voting
Shares

Dividends declared for the nine-month period ended September 30, 2012,
totalled $1.80 per share, or an increase of 10.8% over the dividends
declared for the comparable period in 2011. On November 7, 2012, the
Board of Directors declared a fourth quarter dividend of 64 cents per
share on the issued and outstanding Common Shares and Non-Voting Shares
of the Company, payable on January 2, 2013, to shareholders of record
at the close of business on December 11, 2012. The dividend of 64 cents
per share declared for the fourth quarter of 2012 reflects an increase
of 6 cents or 10.3% from the dividend one year earlier, consistent with
TELUS' dividend growth model.

TELUS plans to continue with two dividend increases per year to 2013,
normally declared in May and November, and expects the annual increase
to be in the range of circa 10% over this timeframe. The dividend
growth model is not necessarily indicative of dividend increases beyond
2013. Notwithstanding this, dividend decisions will continue to be
subject to the Board's assessment and determination of the Company's
financial situation and outlook on a quarterly basis. TELUS is
maintaining its long-term dividend payout ratio guideline of 55 to 65%
of prospective sustainable net earnings.

Maintain a minimum $1 billion in unutilized liquidity - The Company had unutilized credit facilities of more than
$1.3 billion at September 30, 2012, as well as $100 million of
additional availability under the trade receivables securitization
program.

Net debt to EBITDA excluding restructuring costs ratio of 1.5 to 2.0
times - Actual result of 1.7 times at September 30, 2012. See Section 7.4.

Dividend payout ratio guideline of 55 to 65% of sustainable net earnings
on a prospective basis - See Section 7.4.

Preserve access to the capital markets at a reasonable cost by
maintaining investment grade credit ratings in the range of BBB+ to A-,
or the equivalent

At November 9, 2012, investment grade credit ratings from the four
rating agencies that cover TELUS were in the desired range.

4.4 Changes in internal control over financial reporting

There were no changes in internal control over financial reporting that
have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.

5.Discussion of operations

The discussion in this section is qualified in its entirety by the Caution regarding forward-looking statements at the beginning of the MD&A.

5.1 General

The Company's operating segments and reporting segments are Wireless and
Wireline. Segmented information in Note 5 of the Condensed interim
consolidated financial statements is regularly reported to the
Company's Chief Executive Officer (the chief operating decision-maker).

5.2 Summary of quarterly results and trends

Summary of quarterly results

($ millions, except per share amounts
and as noted)

2012 Q3

2012 Q2

2012 Q1

2011 Q4

2011 Q3

2011 Q2

2011 Q1

2010 Q4

Operating revenues

2,774

2,665

2,631

2,690

2,622

2,554

2,531

2,554

Operating expenses

Goods and services purchased

1,222

1,152

1,116

1,316

1,178

1,134

1,098

1,235

Employee benefits expense

534

515

506

500

476

470

447

478

Depreciation and amortization

461

456

470

481

443

442

444

445

2,217

2,123

2,092

2,297

2,097

2,046

1,989

2,158

Operating income

557

542

539

393

525

508

542

396

Financing costs

86

85

75

87

92

94

104

105

Income before income taxes

471

457

464

306

433

414

438

291

Income taxes

120

129

116

69

107

90

110

65

Net income

351

328

348

237

326

324

328

226

Net income attributable to Common Shares and Non-Voting Shares

351

328

348

246

325

321

327

225

Net income per Common Share and Non-Voting Share

- Basic

1.08

1.01

1.07

0.76

1.00

0.99

1.01

0.70

- Diluted

1.07

1.00

1.06

0.75

1.00

0.98

1.00

0.70

Cash dividends declared per Common Share and Non-Voting Share1

0.61

—

1.19

0.58

0.55

0.55

0.525

0.525

Additional information

EBITDA2

1,018

998

1,009

874

968

950

986

841

Restructuring costs included in EBITDA and Operating income

3

13

13

16

3

12

4

38

1

Dividends declared during the first quarter of 2012 include the first
quarter dividend of 58 cents per share paid on April 2, 2012, and the
second quarter
dividend of 61 cents per share paid on July 3, 2012.

2

A non-GAAP measure (see Section 11.1 EBITDA). Equivalent to Operating income before depreciation and amortization
expenses.

Trends

The consolidated revenue trend principally reflects: (i) year-over-year
growth in wireless network revenues generated from a growing subscriber
base and higher ARPU; (ii) wireless equipment revenue that has
generally increased year-over-year; and (iii) year-over-year growth in
wireline data revenues, which now more than offsets declining legacy
wireline voice and other service and equipment revenues.

Increasing wireless network revenue reflects growing data revenue (23%
year-over-year growth in the third quarter of 2012), partly offset by
declining voice revenues (a 2.2% year-over-year decrease in the third
quarter of 2012). Data growth reflects increased use of data plans and
increased data consumption driven by increasing smartphone adoption, as
well as increased roaming revenues. The growing demand for wireless
data may challenge network and spectrum capacity in the future. Blended
ARPU has increased year over year for eight consecutive quarters
following several years of declines, as growth in data ARPU has more
than offset ongoing, but moderating, declines in voice ARPU (see the
table Year-over-year wireless ARPU growth in Section 5.4). Moderation in the data ARPU growth trend is a result of competitive
pressures on data driving bigger included-data buckets in rate plans,
and an increasing number of unlimited messaging rate plans, as well as
a natural slowing of the growth rate following the significant jump in
smartphone adoption and corresponding increase in usage in the latter
part of 2010 and off-loading of data traffic to increasingly available
Wi-Fi hotspots. Voice ARPU declines moderated in recent quarters; the
moderation includes the effect of subscribers adopting more
voice-centric plans.

Wireless equipment revenues have generally increased year over year due
to an increasing proportion of more expensive smartphones and device
upgrade revenues, and in 2011, increased subscriber acquisition and
retention volumes.

There is significant third and fourth quarter seasonality with respect
to higher wireless subscriber additions, related acquisition costs and
equipment sales, and higher retention costs due to contract renewals.
These impacts can also typically be more pronounced around iconic
device launches. Wireless EBITDA typically decreases in the fourth
quarter from heightened competitive intensity. Subscriber additions
have typically been lowest in the first quarter. In addition, wireless
ARPU has generally risen sequentially in the second and third quarters,
and declined sequentially in the fourth and first quarters.

The increasing wireline revenue trend reflects data revenue growth
resulting from continuing expansion of the TELUS TV subscriber base (up
41% in the 12-month period ended September 30, 2012), as well as growth
in enhanced data, Internet and managed workplace revenues. Growth in
Internet revenues includes expansion of the Optik High Speed Internet
subscriber base (7.0% over twelve months) as a result of bundling
offers with Optik TV, as well as rate increases. A general trend of
declining wireline voice revenues and network access lines (NALs) is
due to substitution to wireless and IP-based services and applications,
as well as competition from VoIP service providers (including cable-TV
competitors), resellers and facilities-based competitors. Shaw
Communications Inc. increased its promotional activity and incentives
early in the first quarter of 2012 to win back and protect its
subscriber base and then reduced promotional activity in the latter
part of the first quarter. A sequential increase in residential NAL
losses in the first quarter of 2012 was due to this increased
promotional activity. Moderation in the rate of residential NAL losses
was observed from mid-2010 through most of 2011 and in the second and
third quarters of 2012 due to the positive impact of Optik TV and Optik
High Speed Internet services and improved bundle offers. Residential
NAL losses in the third quarter of 2012 were the lowest since the third
quarter of 2011. The general trend for business NALs is a decline due
to increased competition in the small and medium business (SMB) market,
as well as conversion of voice lines to more efficient IP services.
Business NALs had increased in the first two quarters of 2011 from
implementing wholesale services for enterprise customers.

The trend in the Goods and services purchased expense reflects
increasing content and support costs for the growing TELUS Optik TV
subscriber base, as well as fourth quarter wireless expense seasonality
described above.

The trend in Employee benefits expenses includes compensation increases;
increased full-time equivalent (FTE) staff resulting from acquisitions
and targeted hiring to support TV, business and wireless growth; and
increased employee-related restructuring costs in 2012.

The sequential increase in depreciation and amortization expenses in the
fourth quarter of 2011 resulted from a $19 million write-down of assets
in a foreign operation that were held for sale at December 31, 2011, as
well as from an increase in wireline and wireless broadband capital
assets to facilitate subscriber growth.

Financing costs for each period shown are net of varying amounts of
interest income, including interest from the settlement of prior years'
income tax-related matters. Quarterly financing costs have decreased
mainly due to a lower effective interest rate from refinancing
activities in the second quarter of 2011.

The trends in Net income and earnings per share (EPS) reflect the items
noted above, as well as adjustments arising from legislated income tax
changes, settlements and tax reassessments for prior years, including
any related interest on reassessments.

Consolidated Operating revenues increased by $152 million and
$363 million, respectively, in the third quarter and first nine months
of 2012 when compared to the same periods in 2011.

Service revenue increased year over year by $108 million and $322 million,
respectively, in the third quarter and first nine months of 2012.
Wireless network and other service revenue increased by $83 million or
6.4% in the quarter and $266 million or 7.1% in the nine-month period,
principally due to growth in wireless data network revenues from
subscriber growth and accelerated smartphone adoption as well as
increased roaming volumes, which exceeded the decline in voice network
revenue. Wireline service revenue increased by $25 million or 2.1% in
the quarter and $56 million or 1.6% in the nine-month period, as growth
in data services including TV, Internet and managed workplace services,
exceeded the decline in legacy voice local, long distance and other
services.

Equipment revenue increased year over year by $35 million and $34 million, respectively,
in the third quarter and first nine months of 2012, mainly due to
higher wireline data equipment sales (including a negotiated sale in
the third quarter of 2012) and higher wireless equipment sales.

Other operating income increased year over year by $9 million and $7 million, respectively, in
the third quarter and first nine months of 2012. The increases include
higher drawdowns from the regulatory price cap deferral account in 2012
to recognize provisioning of broadband Internet service to a number of
qualifying rural and remote communities (increases of $4 million in the
quarter and $10 million year to date), as well as recoveries of
employee costs under eligible government-sponsored employment programs
(increases of $3 million for the quarter and $1 million year to date).
The increase for the nine-month period includes a $9 million gain on
land contributed to the TELUS Garden residential real estate
redevelopment project recognized in the second quarter of 2012, partly
offset by equity losses for the TELUS Garden residential partnership of
$2 million. The full gain is $18 million, with recognition of
$9 million deferred until ownership of TELUS Garden condominium units
is transferred after construction is completed. Offsetting the
$9 million second quarter 2012 gain was the first quarter 2011,
$16 million non-cash gain on Transactel (Barbados) Inc., which
reflected a re-measurement of TELUS' 51% interest at fair value when
the Company exercised its purchased call option and asserted control.
Transactel operates call centres in Central America.

Operating expenses

Third quarters ended Sept. 30

Nine-month periods ended Sept. 30

($ millions)

2012

2011

Change

2012

2011

Change

Goods and services purchased

1,222

1,178

3.7 %

3,490

3,410

2.3 %

Employee benefits expense

534

476

12.2 %

1,555

1,393

11.6 %

Depreciation

362

331

9.4 %

1,049

989

6.1 %

Amortization of intangible assets

99

112

(11.6)%

338

340

(0.6)%

2,217

2,097

5.7 %

6,432

6,132

4.9 %

Consolidated Operating expenses increased by $120 million and
$300 million, respectively, in the third quarter and first nine months
of 2012 when compared to the same periods in 2011.

Goods and services purchased increased year over year by $44 million and $80 million, respectively,
in the third quarter and first nine months of 2012, mainly due to
increased content and support costs to grow and manage wireline Optik
TV services, increased costs of sales related to increased wireline
data equipment revenues and higher wireless equipment expenses. These
increases were partly offset by lower wireless marketing expenses.

Employee benefits expense increased year over year by $58 million and $162 million, respectively,
in the third quarter and first nine months of 2012. The increases
mainly reflect higher wage and salary expenses of $36 million in the
third quarter and $114 million for the nine-month period. Wage and
salary expenses increased due to management and bargaining unit
compensation increases, full inclusion in 2012 of operations of certain
TELUS-branded wireless dealership businesses acquired throughout 2011,
smaller acquisitions in 2012, hiring over the past year to support the
growing TV subscriber base, and one additional month of expenses in
2012 from the consolidation of Transactel operations since February
2011. Recoveries in respect of employee defined benefit pension plans
decreased by $4 million in the quarter and $17 million for the
nine-month period, and employee-related restructuring costs increased
by $4 million in the quarter and $16 million for the nine-month period. Share-based compensation increased by $6 million in the quarter and
$16 million for the nine-month period as expense recoveries in 2011
associated with net-cash settlement feature were non-recurring. These
increases were partly offset by higher capitalization of labour of
$9 million in the nine-month period, resulting from higher capital
expenditures to-date in 2012.

Depreciation increased year over year by $31 million and $60 million, respectively,
in the third quarter and first nine months of 2012. The increases were
mainly due to investments in Optik TV and wireless network expansion,
as well as retirements, partly offset by an increase in fully
depreciated computer and digital cell site equipment.

Amortization of intangible assets decreased year over year by $13 million and $2 million, respectively,
in the third quarter and first nine months of 2012 mainly due to an
increase in longer-life assets. The decreases were partly offset by
retirements, increased investment in network and other software assets,
and acquisitions.

Operating income

Third quarters ended Sept. 30

Nine-month periods ended Sept. 30

($ millions)

2012

2011

Change

2012

2011

Change

557

525

6.1 %

1,638

1,575

4.0 %

Operating income increased by $32 million and $63 million, respectively,
in the third quarter and first nine months of 2012 when compared to the
same periods in 2011. Wireless EBITDA increased by $70 million in the
quarter and $212 million in the nine-month period (see Section 5.4), which was partly offset by decreased wireline EBITDA of $20 million in
the quarter and $91 million for the nine-month period (see Section 5.5), and higher total depreciation and amortization expenses.

Financing costs

Third quarters ended Sept. 30

Nine-month periods ended Sept. 30

($ millions)

2012

2011

Change

2012

2011

Change

Interest expenses

87

90

(3.3)%

266

298

(10.7)%

Interest income and foreign exchange

(1)

2

n/m

(20)

(8)

n/m

86

92

(6.5)%

246

290

(15.2)%

Financing costs decreased by $6 million and $44 million, respectively,
in the third quarter and first nine months of 2012 when compared to the
same periods in 2011, mainly due to lower interest expenses. Interest expenses decreased year over year by $3 million and $32 million, respectively, in
the quarter and nine-month periods due to a lower effective interest
rate and lower debt levels. The lower effective interest rate resulted
mainly from refinancing activities in the second quarter of 2011, where
the remaining U.S. dollar Notes matured on June 1 and associated cross
currency interest rate swap agreements were settled (combined effective
interest rate of 8.5%), funded by a May 2011, 3.65% debt issue and
low-rate commercial paper issues.

Interest income and foreign exchange includes interest income of $1 million and $12 million, respectively,
in the third quarter and first nine months of 2012 in respect of the
settlement of income tax-related matters. The amount in the third
quarter of 2011 was a foreign exchange loss. The balances for the first
nine months of 2012 and 2011 are mainly foreign exchange gains.

Income taxes

Third quarters ended Sept. 30

Nine-month periods ended Sept. 30

($ millions)

2012

2011

Change

2012

2011

Change

Basic blended tax at weighted average statutory
income tax rates

121

117

3.4 %

357

349

2.3 %

Revaluation of deferred income tax liability to
reflect future statutory income tax rates

Basic blended statutory income taxes increased slightly in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011, as increases in pre-tax income (8.8% in the quarter and 8.3%
for the nine-month period) were partly offset by lower blended
statutory income tax rates. Revaluation of deferred income tax
liabilities for the first nine months of 2012 includes the effect of
the elimination of previously enacted Ontario corporate income tax rate
reductions in June 2012. Effective tax rates differ from the statutory
tax rates due to revaluations of deferred income tax liabilities; the
tax rate differential on, and consequential adjustments from,
reassessments of prior years' tax issues; and other taxable income
differences.

Comprehensive income

Third quarters ended Sept. 30

Nine-month periods ended Sept. 30

($ millions)

2012

2011

Change

2012

2011

Change

Net income

351

326

7.7 %

1,027

978

5.0 %

Other comprehensive income (OCI)

Items that may be subsequently reclassified to income

2

13

(84.6)%

4

11

(63.6)%

Item never subsequently reclassified to income

94

(360)

n/m

82

(443)

n/m

447

(21)

n/m

1,113

546

103.8 %

Comprehensive income increased by $468 million and $567 million,
respectively, in the third quarter of 2012 and first nine months of
2012 when compared to the same periods in 2011.

Net income increased by $25 million and $49 million, respectively, in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011.

OCI items that may be subsequently reclassified to income are comprised of changes in unrealized fair value of derivatives
designated as cash flow hedges, foreign currency translation
adjustments arising from translating financial statements of foreign
operations, and an $11 million increase in the unrealized fair value of
an available-for-sale TELUS venture capital investment in the third
quarter of 2012.

The OCI item never subsequently reclassified to income is in respect of after-tax actuarial gains and losses on defined
benefit plans, which are likely to fluctuate from period to period.

5.4 Wireless segment

Wireless segment revenues increased by $104 million and $275 million,
respectively, in the third quarter and first nine months of 2012 when
compared to the same periods in 2011.

Operating revenues - wireless segment

Third quarters ended Sept. 30

Nine-month periods ended Sept. 30

($ millions)

2012

2011

Change

2012

2011

Change

Voice

826

845

(2.2)%

2,433

2,515

(3.3)%

Data

546

444

23.0 %

1,556

1,212

28.4 %

Network revenue

1,372

1,289

6.4 %

3,989

3,727

7.0 %

Equipment and other

129

108

19.4 %

323

311

3.9 %

External operating revenues

1,501

1,397

7.4 %

4,312

4,038

6.8 %

Intersegment revenue

10

10

—

30

29

3.4 %

Total operating revenues

1,511

1,407

7.4 %

4,342

4,067

6.8 %

Data revenue to network revenue (%)

40

34

6 pts.

39

33

6 pts.

Network revenue increased by $83 million and $262 million, respectively, in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011.

Voice revenue decreased year over year by $19 million and $82 million,
respectively, in the third quarter and first nine months of 2012, due
to the ongoing trend of declining voice ARPU. The rate of decline in
voice revenues has moderated due to increased subscriber adoption of
voice-centric plans, as well as reduced billing credits resulting from
TELUS' focus on Clear & Simple® initiatives to improve the customer
experience. Year-over-year declines in voice ARPU were due to an
increasing volume of mobile Internet connection devices and tablet
subscriptions where there are no voice revenues, increased use of
included-minute plans for both local and long distance calling, an
increased penetration of the lower ARPU Koodo® brand, partly offset by
increased roaming volumes. Voice ARPU was $36.91 and $36.64,
respectively, in the third quarter and first nine months of 2012,
reflecting year-over-year decreases of $2.71 or 6.8% for the quarter
and $3.17 or 8.0% for the nine-month period. Average minutes used were
up slightly from one year ago.

Data revenue increased year over year by $102 million and $344 million,
respectively, in the third quarter and first nine months of 2012.
Higher data revenues reflect subscriber growth, strength in smartphone
service revenues and text messaging driven by increased smartphone
penetration, higher data roaming volumes, increased adoption of data
plans, growth in mobile Internet connection devices and tablets, and
increased rates for pay-per-use text messaging, as well as reduced
billing credits, partly offset by lower data roaming rates. Data ARPU
was $24.51 and $23.56, respectively, in the third quarter and first
nine months of 2012, reflecting year-over-year increases of $3.61 or
17% for the quarter and $4.26 or 22% for the nine-month period.

Blended ARPU was $61.42 and $60.20, respectively, in the third quarter
and first nine months of 2012, reflecting year-over-year increases of
$0.90 or 1.5% in the quarter and $1.09 or 1.8% in the nine-month
period. The increases were mainly due to increased roaming and
increasing data usage, partly offset by declining voice ARPU. Blended
ARPU has increased year over year for eight consecutive quarters.

Year-over-year wireless ARPU growth (%)

2012 Q3

2012 Q2

2012 Q1

2011 Q4

2011 Q3

2011 Q2

2011 Q1

2010 Q4

Blended ARPU

1.5

2.4

1.7

1.0

3.0

2.5

2.7

1.9

Data ARPU

17.3

21.1

28.9

35.2

43.8

39.5

34.8

27.1

Voice ARPU

(6.8)

(6.7)

(10.3)

(11.9)

(10.4)

(9.3)

(5.8)

(5.2)

Gross subscriber additions decreased year over year by 38,000 or 8.1% in
the third quarter of 2012, and decreased year over year by 116,000 or
8.9% in the first nine months of 2012. Heightened competitive intensity
was reflected in price competition for devices, an increased number of
promotional rate plan offers, port-in credits and in-store credits from
both established national competitors and newer entrants. Postpaid
gross additions decreased year over year by 41,000 or 12% in the
quarter and 82,000 or 8.8% in the nine-month period. Loading in the
third quarter of 2012 was somewhat impacted by delayed customer
purchase decisions ahead of the widely anticipated iPhone 5 launch on
September 21, while loading year-to-date was also affected by tightened
credit policies. Prepaid gross additions increased year over year by
3,000 or 2.5% in the quarter and decreased by 34,000 or 9.1% in the
nine-month period. The improvement in the current quarter was mainly
due to the August 2012 launch of prepaid services under the Koodo
brand.

Net subscriber additions decreased year over year by 3,000 or 2.6% in
the third quarter of 2012 and decreased year over year by 21,000 or
8.8% in the first nine months of 2012.

Postpaid net additions decreased year over year by 17,000 in the third
quarter of 2012 and increased year over year by 14,000 in the first
nine months of 2012. Postpaid net additions in the third quarter were
somewhat impacted by delayed customer purchase decisions ahead of the
widely anticipated iPhone 5 launch. Although initial demand for the
iconic device was significantly stronger than seen previously at the
launch of the iPhone 4S, some volume-related system issues were
experienced on launch day and initial supplies were constrained.
Postpaid net additions in the first half of 2012 and during 2011 were
impacted by the loss of subscribers from a federal government wireless
contract to a low bid by an established national competitor. Excluding
these losses, postpaid net additions were 116,000 and 299,000,
respectively, in the third quarter and first nine months of 2012, as
compared to 152,000 and 344,000, respectively, in the third quarter and
first nine months of 2011. The normalized decreases of 36,000 and
45,000, respectively, for the quarter and the nine-month period
resulted from lower postpaid gross subscriber additions, partly offset
by continuing strong performance on postpaid churn.

Prepaid net subscriber losses were 5,000 and 72,000, respectively, in
the third quarter and first nine months of 2012, as compared to net
losses of 19,000 and 37,000, respectively, in the third quarter and
first nine months of 2011. Prepaid subscriber losses include
conversions to postpaid as part of retention efforts, as well as
increased competitive intensity in the lower value market segments and
the Company's choice to not match certain competitive offers. The
improvement in the third quarter was partly due to the August 2012
launch of prepaid services under the Koodo brand.

The blended monthly wireless subscriber churn rates were 1.44% and
1.46%, respectively, in the third quarter and first nine months of
2012, as compared to 1.67% and 1.68%, respectively, in the third
quarter and first nine months of 2011. The 1.44% blended churn rate for
the current quarter is the lowest third quarter churn rate since 2007.
Blended churn rates in 2011 included effects from the loss of a federal
government wireless contract. Improved churn rates in 2012 are
primarily attributed to the Company's continued focus on the customer
experience including the Clear and Simple Device Upgrade program, which
makes it easy for postpaid clients to upgrade to new devices before the
end of their contracts, as well as focus on retaining high-value
clients and tightened credit policies. In addition, in the fourth
quarter of 2012, TELUS eliminated activation and renewal fees.

The smartphone adoption rate was 73% of postpaid gross additions in the
third quarter of 2012, as compared to 70% in the third quarter of 2011.
Smartphone subscribers represented 63% of the postpaid subscriber base
at September 30, 2012, as compared to 48% one year earlier. Smartphone
subscribers generate significantly higher ARPU and have lower churn
than those with messaging and voice-only devices, but have higher costs
of acquisition and retention resulting from the large device subsidies
for multiple-year contract sales or renewals. A higher smartphone mix
is expected to continue to positively impact future data revenue
growth, ARPU and churn rates, which increase expected lifetime revenue.
The higher smartphone mix is also expected to increase future costs of
retention and network usage, and require ongoing network capacity
investments.

Equipment and other revenues increased by $21 million and $12 million, respectively, in the third
quarter and first nine months of 2012 when compared to the same periods
in 2011. Wireless equipment revenues increased mainly due to higher
handset prices from a higher proportion of smartphones in the sales
mix, partly offset by lower acquisition and retention volumes and
competitive pressures, which drove higher handset subsidies. Retention
volumes decreased year over year as significant numbers of postpaid
clients upgraded their devices in 2011 under the Clear and Simple
Device Upgrade program. Other operating income in the third quarter of
2012 includes $2 million of recoveries of employee costs under eligible
government-sponsored employment programs.

Intersegment revenue represents services provided by the wireless segment to the wireline
segment and is eliminated upon consolidation along with the associated
expense in the wireline segment.

Wireless operating indicators

At September 30

2012

2011

Change

Subscribers (000s)

Postpaid

6,420

5,982

7.3 %

Prepaid

1,138

1,229

(7.4)%

Total

7,558

7,211

4.8 %

Postpaid proportion of subscriber base (%)

85.0

83.0

2.0 pts.

Total digital population coverage1 (millions)

34.7

34.3

1.1 %

HSPA+ population coverage2 (millions)

34.3

33.6

2.1 %

Third quarters ended Sept. 30

Nine-month periods ended Sept. 30

2012

2011

Change

2012

2011

Change

Subscriber gross additions (000s)

Postpaid

309

350

(11.7)%

850

932

(8.8)%

Prepaid

125

122

2.5 %

341

375

(9.1)%

Total

434

472

(8.1)%

1,191

1,307

(8.9)%

Subscriber net additions (000s)

Postpaid

116

133

(12.8)%

291

277

5.1 %

Prepaid

(5)

(19)

73.7 %

(72)

(37)

(94.6)%

Total

111

114

(2.6)%

219

240

(8.8)%

ARPU3 ($)

61.42

60.52

1.5 %

60.20

59.11

1.8 %

Churn, per month3 (%)

1.44

1.67

(0.23) pts.

1.46

1.68

(0.22) pts.

Average monthly minutes of use per subscriber (MOU)

338

332

1.8 %

334

331

0.9 %

COA4 per gross subscriber addition3 ($)

402

397

1.3 %

390

373

4.6 %

Retention spend to network revenue3 (%)

11.0

11.9

(0.9) pts.

10.8

12.0

(1.2) pts.

EBITDA to network revenue (%)

46.6

44.2

2.4 pts.

47.6

45.2

2.4 pts.

1

Including roaming/resale and network access agreements.

2

Including network access agreements.

3

See Section 11.3 Definitions of key wireless operating indicators. These are industry measures useful in assessing operating
performance of a wireless company, but are not measures defined under
IFRS-IASB.